Droga5 Sells Stake to Talent Agency William Morris Endeavor

One of Madison Avenue's Hottest Shops Secures More Outside Investment

There's a new entourage in the making: One of Hollywood's most powerful moguls, Ari Emanuel, and one of Madison Avenue's brilliant minds, David Droga, are linking up: Talent agency William Morris Endeavor has bought a 49% stake in Droga5, the agency founded in 2006.

Terms of the deal were not disclosed.

David Droga Credit: Steve Carty for Hermann & Audrey

Mr. Droga -- the Aussie founder of the shop and one of the industry's most respected minds -- has been gradually handing more responsibility to others. In April, he made Sarah Thompson CEO of Droga5, New York. But in a statement today the two companies said Droga5's agency management will stay intact.

It's not the first time Droga5 has sought outside investment. In a smaller deal last year, the agency received an infusion from a private investor group led by Apollo Global Management's Henry Silverman and Clear Channel CEO Bob Pittman. They are understood to remain advisers.

Since then, Mr. Droga has been seeking more funds. Multiple industry executives say the shop, which has offices in New York, London and Sydney, has talked with potential buyers in recent months, but price has been an obstacle.

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Droga5 was advised by Kirkland & Ellis in the U.S. and Clayton Utz in Australia. WME was advised by Paul, Weiss, Rifkind, Wharton & Garrison in the U.S. and Corrs Chamber Westgarth in Australia.

One industry exec estimated WME's investment is around $150 million, which would be steep considering that in recent years, most sales in adland have been digital, mobile and data-marketing companies. In contrast, Droga5 has essentially been a highly admired and innovative traditional shop. It's a regular on the awards circuit and performed well at last month's Cannes International Festival of Creativity.

"Droga5 has always endeavored to be the most influential creative agency in the business, with ideas that move our clients and our industry forward," Mr. Droga said in a statement. "This partnership will exponentially accelerate our ability to realize that ambition." The agency hopes the tie-up will expand its access to WME's relationships in entertainment.

In its seven years, Droga5 has consistently churned out great creative work. And it has gone from doing mostly pro bono campaigns for charities to working for big multinational marketers. It works with Spotify, Coca-Cola, American Express, Mondelez, Hennessy and Prudential; it recently added Google-owned Motorola.

The agency has also collaborated with Hollywood and the music industry; it's worked with comedian Sarah Silverman on the political campaign "The Great Schlep" and partnered with Microsoft's Bing for work linked to Jay-Z's autobiography.

For WME, the lure of the deal could be increased competition with CAA, whose marketing arm has been lauded for its creative chops. The CAA unit was responsible for Chipotle's ballyhooed "Back to the Start" campaign.

Mr. Emanuel, co-CEO of WME and founding partner of Endeavor (which merged with William Morris in 2009), is known for his outsize personality. He's widely considered the inspiration for the Ari Gold character in "Entourage." His brother is Rahm Emanuel, the equally vigorous mayor of Chicago.

"Droga5 is best-in-class across the board -- from its management to its creative output," Mr. Emanuel said in a joint statement with WME co-CEO Patrick Whitesell. Through this investment, we will be able to join the best artists and storytellers from all verticals."

WME -- which is backed by Silicon Valley private-equity firm Silver Lake Partners -- has worked with marketing agencies before. It was a unit of Interpublic Group of Cos. until 2001, when it was sold back to WME execs. And a couple years ago, it formed a partnership with former Omnicom Group Vice Chairman Michael Birkin's marketing venture, Red Peak Group. In recent years, it has focused on strategic investments in social media, social gaming and online retail.